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Fans of Drag Racing history will want to make sure they are tuned in, or their DVR is set to record “Inside Drag Racing” this Sunday morning at 11:30 AM on the Fox Sports Network, as they are showing their coverage of the 2009 International Drag Racing Hall of Fame induction.

The hall is located at the Don Garlits museum in Ocala, Florida and is the most prestigious drag racing related hall of fame in the world. This year’s class consisted of Steve Carbone, Ed Garlits, Marvin Graham, Hayden Profitt, Fritz Voigt, and Sid Waterman.

Obama's pays back the Unions by extorting the holders of the secured debt.

Quote:

Originally Posted by [url]http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_hassett&sid=atacn_gbYxHI[/url]

Goldman Sachs Foreshadowed UAW’s Chrysler Coup

Commentary by Kevin Hassett

May 4 (Bloomberg) -- I feel like I have seen this bad gangster movie before.

In the opening scene, a naive investor buys some bonds, explaining to his staff that they are a sound investment secured by hard assets. Even if the company goes under, the investor explains, bond investors stand to get about 80 percent of their money back.

The next day, a government official calls and offers to buy up the bonds at 33 cents on the dollar, while giving controlling interest in the company to the labor unions. The investor refuses. That night, a man shows up at his home.

“We’re not saying anything bad is going to happen to you,” the tough says, “but the big boss is going to be very disappointed in you if you don’t take the deal. By the way, how’s your little girl? Is she still going to school down on Federal Street?” The investor caves.

The evolution of the Chrysler LLC bankruptcy seemed almost as bad. The Obama administration brokered a deal that gave labor unions a 55 percent equity stake in Chrysler, putting their interests ahead of the secured interests of bondholders.

The bondholder response to the deal was positively creepy.

Politicians were probably offering them a worse deal than they could expect to get in bankruptcy court. Bondholders that have been participating in the government bailout program for banks -- and thus are especially susceptible to political pressure -- agreed to accept the deal. But many of the independent investors balked.

‘Financial Sacrifices’
The reasoning of the hold-outs was captured in a statement by OppenheimerFunds Inc., which said the government “unfairly asked our fund shareholders to make financial sacrifices greater than those being made by unsecured creditors.”

Stories circulated that the Treasury Department exerted extreme pressure behind the scenes when investors refused to take the deal. Public pressure was exerted as well.

President Barack Obama went to the podium to criticize the recalcitrant investors, and Democratic Representative John Dingell of Michigan pressed the threats even harder: “The rogue hedge funds that refused to agree to a fair offer to exchange debt for cash from the U.S. Treasury -- firms I label as the ‘vultures’ -- will now be dealt with accordingly in court,” Dingell said.

All the government stops were being pulled out to present the United Auto Workers with a sweetheart deal that, incredibly, gives its retiree health-care fund majority ownership of Chrysler.

Yes, those are the same workers who pushed the firm toward bankruptcy in the first place with their extraordinarily generous compensation packages. DaimlerChrysler AG’s average cost to employ a UAW worker in 2006, including benefits, was 1.7 times that of Japanese automakers, according to company estimates.

Expensive to Fire
Firing that worker is expensive, too. The 2007 collective- bargaining agreement required the automakers to pay up to $140,000 in severance to a worker whose position was eliminated and who agreed to leave with no additional benefits.

The spectacle should sicken any fair-minded citizen, especially since organized labor contributed about $68 million to Democrats in the last election cycle.

The sad truth is there is enough data on the government rescue efforts to indicate decisively that OppenheimerFund would have received a much better deal if it was politically well- connected. It’s an especially good idea to have connections in both parties.

When American International Group Inc. crumbled, threatening Goldman Sachs with huge losses, the government stepped in and made the firm whole. It funneled a whopping $12.9 billion to Goldman Sachs through the AIG bail-out.

Part of Club
Might the government have been so generous because Henry Paulson, Treasury secretary under President George W. Bush, and Robert Rubin, an Obama adviser, are both former Goldman Sachs men?

Maybe it’s just a coincidence, but time after time, it is precisely the politically well-connected players who present so much systemic risk that the government needs to protect them at all costs.

Obama recently conceded to an interviewer that “the only thing less popular than putting money into banks is putting money into the auto industry.” With Democrats riding a winning streak, it’s clearly a political risk he is willing to take.

If this were a Hollywood production, a virtuous politician played by Tom Hanks or Jimmy Stewart would speak out against the bailouts and sweep the corruption out of Washington.

Sadly, in real life, it seems there is nobody in either party ready to stand up and fill that role.

(Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist. He was an adviser to Republican Senator John McCain of Arizona in the 2008 presidential election. The opinions expressed are his own.)

WASHINGTON – President Barack Obama asserted unprecedented government control over the auto industry Monday, bluntly rejecting turnaround plans by General Motors Corp. and Chrysler LLC, demanding fresh concessions for long-term federal aid and raising the possibility of quick bankruptcy for either ailing auto giant.

Obama took the extraordinary step of announcing the government will back new car warranties issued by both GM and Chrysler, an attempt to reassure consumers their U.S.-made purchases will be protected even if the companies don't survive.

"I am absolutely committed to working with Congress and the auto companies to meet one goal: The United States of America will lead the world in building the next generation of clean cars," Obama said in his first extended remarks on the industry since taking office nearly 10 weeks ago. And yet, he added, "our auto industry is not moving in the right direction fast enough to succeed."

Obama, flanked by several administration officials at the White House, announced a short-term infusion of cash for the firms, and said it could be the last for one or both.

Chrysler, judged by the administration as too small to survive, got 30 days' worth of funds to complete a partnership with Fiat SpA, the Italian manufacturer, or some other automaker.

GM got assurances of 60 days' worth of federal financing to try and revise its turnaround plan under new management with heavy government participation. That would involve concessions from its union workers and bondholders. The administration engineered the ouster of longtime CEO Rick Wagoner over the weekend, an indication of its deep involvement in an industry that once stood as a symbol of American capitalism.

Obama's announcement underscored the extent to which automakers have been added to the list of large corporations now operating under a level of government control that seemed unthinkable less than a year ago. Since last fall, the Bush and Obama administrations, often acting in concert with the Federal Reserve, have engineered the takeover of housing titans Fannie Mae and Freddie Mac, seized a large stake in several banks and installed a new CEO at bailed-out insurance giant American International Group.

Other presidents have forced showdowns with major industries, with mixed results. Harry Truman's decision to nationalize the steel industry on the eve of a strike in 1952 was ruled unconstitutional by the Supreme Court. But Ronald Reagan succeeded in busting the air traffic controllers' union three decades later.

The latest addition to the list, the once-proud auto industry, has struggled with foreign competition for more than a generation, then was further battered by the recession and credit crisis gripping the economy. Obama said 400,000 industry jobs have been lost in the past year alone, many in Michigan.

Under Fritz Henderson, newly named as CEO, General Motors issued a statement saying it hopes to avoid bankruptcy, but will "take whatever steps are necessary to successfully restructure the company, which could include a court-supervised process."

Chrysler Chairman Bob Nardelli sought to assure customers, dealers, suppliers and employees that the automaker "will operate 'business as usual' over the next 30 days" while working closely with the government and Fiat to secure the support of stakeholders.

Sergio Marchionne, CEO of Fiat, issued a statement calling the Obama administration's involvement "tough but fair, and we believe we will arrive at a result that will establish a credible future for this crucial industrial sector and that assigns the right priority to the repayment of U.S. taxpayers' funds."

Fiat executives have talked to administration officials about a proposal to acquire a 35 percent stake in Chrysler in exchange for small car technology, transmissions and other items that Chrysler has valued at $8-$10 billion.

There was no immediate response from the United AutoWorkers Union. One worker, Don Thompson, 56, of Chesterfield Township in Michigan, said automakers were being punished because of public anger over the banking bailout. "They're using us for the mistakes they've made in Washington," he said.

Other workers alleged a double standard in how Washington dealt with Wagoner, as opposed to CEOs of bailed-out banks. "They're using him as a fall guy," said Frank Rowser, financial secretary for UAW Local 909.

When Wagoner leaves the automaker, he will take a financial package worth an estimated $23 million.

Ford Motor Co., the third member of the Big Three, has not requested federal bailout funds.

Obama said bankruptcy would be a way for either GM or Chrysler to "quickly clear away old debts that are weighing them down so they can get back on their feet," and stressed that either firm would remain open.

"What I am not talking about is a process where a company is broken up, sold off and no longer exists. And what I am not talking about is having a company stuck in court for years, unable to get out," he said.

Still, fears about the industry's future sent stocks plummeting, with the Dow Jones industrial average losing about 254 points. GM plunged 92 cents, or 25.4 percent, to $2.70. Chrysler is not publicly traded.

Obama's remarks were prompted by the expiration of a temporary bailout approved by the Bush administration last winter, with $17 billion in federal funds to help GM and Chrysler survive. Under its terms, the two automakers had until March 31 to submit restructuring plans as it searched for additional federal funds.

At the time, it appeared Bush had avoided an industry collapse on his watch yet had deferred the most difficult decisions for his successor.

By his comments, Obama bought himself a little more time, but made it clear it was fast running out. "Now is the time to confront our problems head-on and do what's necessary to solve them," he said.

The administration issued papers detailing the prospects for survival of both GM and Chrysler, credited them with making difficult choices, yet also stressing the difficulties that remain.

It said that while GM's new car of the future, the Volt, "holds promise, it will likely be too expensive to be commercially successful in the short run."

The government has said it's willing to provide another $6 billion in financing for Chrysler if it is able to finalize an alliance with Italy's Fiat Group SpA. But to get the money, Chrysler must rid its balance sheet of most of its debt, including any investment by its private owners.

That means Chrysler's majority owner, Cerberus Capital Management LP, would have to give up the $1 billion interest it has in the automaker, according to a person briefed on the deal. The person asked not to be identified because terms are still being negotiated.

Cerberus would retain ownership in Chrysler's financial arm, but it has pledged to the government the first $2 billion in profits to repay a federal cash infusion, the person said.
____ Associated Press writers Jim Kuhnhenn and Ken Thomas in Washington and Ben Leubsdorf in Warren, Mich., contributed to this report.

OK since this is a Mopar board, and this involves politics -- this is the one exception thread where you can comment and cross the line of discussing politics. I see it impossible to comment without involving politics. Don't confuse this exception to the rule with the rule that all politics is discussed in the Premium Member's Political forum.

DETROIT -- Even if Chrysler LLC gets additional government loans, it could face another cash shortage in July when revenue dries up as the company shuts down its factories for two weeks to change from one model year to the next, its chief financial officer said.

CFO Ron Kolka, in a brief telephone interview with The Associated Press, said the company planned for the $4 billion it received Jan. 2 to last through March 31. The company is talking with the Obama administration's auto task force about getting another $5 billion, and faces a March 31 deadline to complete its plan to show how it can become viable and repay the loans.
Kolka wouldn't say what would happen if the company doesn't get further government aid, saying only that he's not planning to run out of money.

Chrysler's viability plan submitted to the Treasury Department on Feb. 17, he said, calls for the additional government aid.

"Following that, the next critical low point in cash is July shutdown," he said Friday.

Automakers generally book revenue from a vehicle once it leaves the factory and heads for a dealership. But when it doesn't produce cars during the shutdown, the revenue stops flowing.

Kolka said Chrysler planned conservatively so the company can be viable even at the current U.S. industry annual sales rate of 9.1 million vehicles, the lowest level in 27 years.

Executives with Chrysler and General Motors Corp., which also is using government loans to stay out of Chapter 11 bankruptcy protection, met with the government task force on Monday in Detroit, visiting GM's tech center and a Chrysler pickup truck factory in the Detroit suburb of Warren.

"They were not negative and they were not critical," he said. "They were asking the right questions."

Chrysler's plan submitted to the government has conservative assumptions about industry sales and per-vehicle pricing, and doesn't include the company benefiting from any potential uptick in per-vehicle pricing or a possible alliance with Italian automaker Fiat Group SpA.

Chrysler is in talks about Fiat taking a 35 percent stake in the Auburn Hills automaker in exchange for its small-car technology.

Kolka also said Chrysler's tentative deal on labor cost concessions with the United Auto Workers union will comply with the terms of the government loans. The loan term sheets set targets for GM and Chrysler to make their total hourly labor costs equal to those of Japanese automakers with U.S. factories.

UAW workers at Ford Motor Co. have ratified contract changes that cut labor costs to $55 per hour including wages, pensions, retiree health care and other benefits. That's still about $6 more than the highest Japanese company.

GM and Chrysler have reached labor cost deals with the UAW, but details haven't been released pending a vote by workers. Both companies are still negotiating changes in payments to a union-run trust fund that will take over retiree health care expenses starting next year.

The loan terms also set a target for Chrysler and GM to swap equity for 50 percent of the cash they were scheduled to pay into the trust funds.

Kolka said Ford's deal on the trust fund doesn't comply with the terms of the government loans and won't work for Chrysler. He said Chrysler and the UAW have agreed in principle to an equity swap, but the mechanics are still being negotiated.

Ford agreed to swap 50 percent of its payments for stock, with plans to issue more stock to the trust if the price falls.

OTTAWA -- A Chrysler executive issued a grim threat to Canadian lawmakers, warning the struggling U.S. automaker may shut down its plants in Canada if it doesn't get significant labor concessions and government aid.

"Chrysler LLC cannot afford to manufacture products in a jurisdiction that is uncompetitive, relative to other jurisdictions," President Tom LaSorda told a Parliamentary committee Wednesday night.

Chrysler's labor costs in Canada work out to about 20 dollars an hour more than automakers such as Toyota and Honda, LaSorda told the committee.

The automaker also asked for roughly U.S. $2.3 billion dollars from the Canadian and Ontario governments and demanded relief in a tax dispute with Ottawa. The company has about 9,000 employees in Canada.

"Failure to satisfactorily resolve these three factors will place our Canadian manufacturing operations at a significant disadvantage relative to our manufacturing operations in North America and may very well impair our ability to continue to produce," LaSorda said.

Chrysler LLC and its Canadian subsidiary have been hit particularly hard by the slump in auto sales. Chrysler's Canadian sales were down 27 percent in February compared with a year earlier.

General Motors Canada, which has also asked for billions in government aid amid slumping sales, reached a new agreement with the Canadian Auto Workers union last weekend, providing labor cost concessions. Workers approved the deal in voting on Tuesday and Wednesday.

WASHINGTON -- The chief executive of Fiat SpA told the White House auto task force Thursday that the Italian automaker could help Chrysler LLC recover and repay the billions it is borrowing from the government.
CEO Sergio Marchionne also assured U.S. officials that none of the money lent to Chrysler would leave the United States if Fiat and Chrysler concluded their proposed alliance.

"The main objective is going to be to repay every single dollar of taxpayer funding before anybody gets anything," he said after meeting with key members of the task force.

Speaking with reporters as he left the U.S. Treasury building, Marchionne said he outlined to the task force the contributions Fiat would bring to Chrysler. "We think we're adding significant technology and products to the offerings of Chrysler. With them, I think they've got a fair chance of making it."

In spite of the U.S. auto market's collapse in the past two months, Marchionne said he was as optimistic now about the potential benefits of an alliance as he was at the start of the year, when Fiat and Chrysler's majority owner, Cerberus Capital Management LP, concluded a preliminary agreement.
"Nothing has happened that would change my mind," he said after the 2 1/2 -hour, closed-door meeting, which Fiat officials characterized as friendly and informal.

Steve Rattner, a restructuring expert who co-founded Quadrangle Group LLC, a Wall Street firm, and former labor adviser Ron Bloom ran the meeting, peppering Marchionne with questions not only about the proposed deal with Chrysler but also about the European market. Marchionne said he was encouraged by the U.S. officials' grasp of the industry's difficulties.

"The feeling that I got from them is that they recognize the magnitude of the problem and there's an absolute determination to finding a solution," he said.
Treasury officials were not available for comment.

Marchionne, an affable Italian-Canadian businessman credited with turning Fiat around, said the Turin-based carmaker was "well advanced" with its due-diligence examination of Chrysler, which is preparing its own report for the U.S. government.

Chrysler and General Motors Corp. are required to submit reports by March 31 detailing their efforts to restructure, reduce their debts and cut labor costs to become viable businesses, as a condition of the federal aid.

In addition to $4 billion in loans Chrysler has received, the automaker is seeking $5 billion. Marchionne declined to say whether the deal hinged on those loans but said, "the project is subject to additional financing coming in."

As the smallest of Detroit's automakers, Chrysler is widely viewed as the weakest because of its extreme reliance on the U.S. market, and notably on large-vehicle segments that have been battered in this downturn.

While some politicians and industry analysts say Chrysler could fail without endangering the entire U.S. auto industry, Marchionne said he didn't get any sense that the task force viewed Chrysler as being of secondary importance. "They were as keenly interested in Chrysler as they would have been in anyone else in the automotive industry," he said.

Another auto expert, Craig Cather, president of forecasting and consulting firm CSM Worldwide of Northville, said the viability plan Chrysler submitted last month to the government appeared weaker than GM's, and some of its assumptions seemed optimistic.

But he said at a briefing here Wednesday that a collapse of Chrysler would threaten the industry because it could endanger suppliers on the verge of failing -- and that, in turn, would imperil Detroit's bigger automakers.

Chrysler has told the government that it can survive alone, but signaled in its plan that it would fare better with a partner. In its submission to the government, it estimated the deal with Fiat would create synergies of about $7 billion by 2016.

Fiat has proposed to take a 35 percent stake in Chrysler, with an option to acquire another 20 percent, in exchange for sharing small-car platforms and engines with Chrysler.

It will not invest cash in Chrysler but Marchionne said the expertise it will share entails "technology, platforms, engines, know-how -- all stuff that has been paid for and worked on by Fiat over a number of years."

DETROIT -- Even though its sales were down 44 percent last month, Chrysler LLC Vice Chairman Jim Press said the automaker is on target to meet sales projections outlined in its viability plan submitted to Congress last month.

Chrysler sold just over 84,000 cars and trucks in February, 44 percent fewer than the 150,000 it sold the same month last year.

But Press said in an interview with The Associated Press on Friday that 84,000 in February is enough to keep the company going. He says retail sales to individuals dropped 25 percent, but that was a lower decline than any of Chrysler's competitors.

Chrysler has received $4 billion in government loans and is seeking $5 billion more. Without the loans, the company would have faced bankruptcy protection or liquidation.

"It's sustainable," Press said of February's sales levels, calling it a good month relative to the company's sales in prior months.

U.S. light vehicle sales overall were down 41 percent in February, but in absolute numbers were up 4.9 percent over January sales.

"With 84,000 in February, we're on our target that we established with our viability plan, our submission with Washington," he said.

In its plan, Chrysler showed it could survive if U.S. sales fell as low as 10.1 million vehicles per year, Press said. February's annual selling rate was 9.1 million vehicles, but Press said sales should rise in March, April and May.
The company, he said, is trying to "build muscle" to cope with depressed auto sales levels.

"Who knows how long we're going to be in this?" Press asked. "This is going to be a year, two years, or longer. So we've got to find a ways to try and manage through this and that's what we're doing."

Chrysler spent more on incentives such as rebates and low-interest financing in February than any other major automaker, according to the Edmunds.com automotive Web site. The company spent an average of $5,508 per vehicle during the month, more than $1,800 above the second-biggest spender, General Motors Corp. at $3,681, Edmunds said.

Press also said Chrysler still will not need more government loans until March 31, the date of its original request for a second installment. And he said negotiations with Italy's Fiat Group SpA to take a 35 percent stake in Chrysler in exchange for its small-car technology are progressing.

Asked if Chrysler might run out of cash before March 31, Press reiterated that it is matching the plan submitted to the government. The company came perilously close to running out of money in December before the government loan was made available.

On Fiat, Press said the companies are planning for a combination.
"We're hopeful. We've seen no roadblocks between us," he said.

On Thursday, Fiat Chief Executive Sergio Marchionne told reporters that talks were "well advanced" and that Fiat could match timelines set by the Treasury Department for a combination.

Fiat would put no cash into the Chrysler deal, but would offer small-car and small-engine technology.

"We think we are adding significant technology and products to the offering of Chrysler. I think with them they have a fair chance of making it out," Marchionne said after meeting with the government's auto task force.
The deal with Fiat is contingent on further government loans being approved, he said.

Press said Marchionne has been through a large restructuring of Fiat similar to what Chrysler is going through.

The Italian company, he said, has the most fuel-efficient product line in Europe.

WASHINGTON – Chrysler LLC will need an additional $5 billion to survive the U.S. recession, telling the Obama administration today that it plans to cut an additional 3,000 jobs this year and eliminate the Chrysler Aspen, Dodge Durango and the Chrysler PT Cruiser as part of its restructuring plan.

The automaker, which disclosed today that it lost $8 billion in 2008, warns that if it does not receive the federal money and needed concessions by March 31, "management believes the only alternative would be to immediately plan for an orderly wind down of all operations through a court-supervised liquidation.

"This is clearly not an alternative Chrysler would prefer, but is one that the Company is prepared to implement if required," the company said in its submission to the U.S. Treasury.

The additional money, some of which Chrysler has said it needs before the end of March, would come on top of the $4 billion that Chrysler received last year, for a total rescue of $9 billion.

Along with the job cuts, Chrysler said it is planning to cut total costs by $700 million this year, stop building three models, sell $300 million in assets and cut its factory capacity by 100,000 vehicles.

The company said it had reached agreement with the UAW for concessions on wages to be competitive with foreign-owned automakers in the United States and retiree health-care trust funds, but was still in talks with suppliers and debtholders.

Chrysler said the plan “demonstrates standalone viability which could be enhanced through a strategic alliance” with Fiat SpA. Chrysler says it plans envisions it beginning to pay back the federal loans through 2012.

The government requested that as part of its plan, Chrysler describe a liquidation plan, including a Chapter 11 plan. Under a Chapter 11 reorganization, the company would require $20 billion to $25 billion in financing to make it through two years.

“It would cost a lot more money and it would cause tension and concern both among the dealers and the customers that’s not necessary,” said Chrysler Vice Chairman Jim Press.

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